Pension Fund Asset Allocation and Liability Discount Rates

Aleksandar Andonov; Rob Bauer; K. J. Martijn Cremers

doi:10.1093/rfs/hhx020

Pension Fund Asset Allocation and Liability Discount Rates

Aleksandar Andonov¹; Rob Bauer²; K. J. Martijn Cremers³

¹ Erasmus University Rotterdam · ² Maastricht University and International Centre for Pension Management · ³ University of Notre Dame

Review of Financial Studies 2017 open access

The unique regulation of U.S. public pension funds links their liability discount rate to the expected return on assets, which gives them incentives to invest more in risky assets in order to report a better funding status. Comparing public and private pension funds in the United States, Canada, and Europe, we find that U.S. public pension funds act on their regulatory incentives. U.S. public pension funds with a higher level of underfunding per participant, as well as

DOI: 10.1093/rfs/hhx020
Volume: 30 (8)
Pages: 2555-2595
Language: en
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